Most banks and commercial lenders have large appetite for owner occupied commercial real estate financing specially in California. Thanks to Recovery Act and Federal Government?s commitment to small business owners, lenders are offering very aggressive owner-user financing options with highest possible leverage in the marketplace. Banks and capital providers are financing commercial real estate properties in the 50%-60% loan to value (LTV) range with higher leverage depends on the types of tenancy. However, for owner user commercial properties, lenders offer 75% LTV on conventional Loan and 90% with SBA Loan.
Commercial loan rates have also gone up for a while now with pricings in 6% plus range. Some banks are offering loans in 7% pricing range. These banks and capital providers offer these rates for properties with good cash flow and property owners that are well-capitalized and willing to put significant equity into the deal. But owner-user commercial real estate owners can also enjoy lower pricing in addition to higher leverage. Rates are the most favorable in owner user commercial real estate loan and vary daily with 2.50 to 3.0 basis point spread over different US treasury Indices or Prime rate. For example, one of our lenders had the following pricing for last week: 5 year fixed at around 4.8% to 5.1%, 7 year fixed around 5.5% -5.75% and 10 year fixed for about 5.8%. Some lenders may require a depository relationship to offer lower pricing on a deal. For the 75% to 90% LTV commercial loans, the SBA adds a 2nd TD priced at the SBA debenture rate. Currently it is approximately 5.52% for 20 year fixed amortized over 20 years
Of course purchasing owner-user commercial property is not for every business owner. All lenders require healthy 2-3 years trailing income on corporate and personal returns. What that means is that business owners have been in profitable operations for at least past 2-3 years and can prove it with their tax returns both corporate and personal. As a business owner, you have financing options that are appearing in the market for both refinancing and purchase. Your challenge is to find the right capital provider that would be a good fit for your commercial financing.
Shawn Shayestehfar is the managing partner of City Capital Finance, a boutique commercial real estate fianancing firm. We arrange SBA and owner occupied commercial financing for business owners acquiring commercial properties. Our firm has the vast knowledge to properly structure owner user real estate financing and the relationships to identify lenders that are actively financing the specific owner occupied real estate property you are acquiring.
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